Think Chinese stock and property markets are a bubble? You haven’t seen nothing yet according to Bank of America Merrill Lynch.
Wait until real interest rates go negative due to rising inflation butting against ultra-stimulative interest rates.
Business Week: “Next year could be the year we see a full-blown asset bubble,” David Cui, the China strategist at Bank of America Corp.’s Merrill Lynch unit, said today in a phone interview from Sydney. “We’re likely to see massive savings migration as we head into real negative interest-rate territory,” where people “save less, spend more and invest more,” he said.
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Interest on bank savings accounts may fall below the rate of inflation next year. Consumer prices climbed 0.6 percent in November from a year earlier, snapping a nine-month run of deflation, and prices may rise 3 percent in the first quarter, driving more savings into equities, the China Securities Journal said in a front-page editorial today. The 12-month savings deposit rate is 2.25 percent, central bank data showed.
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